The Maghribi industrialists: contract enforcement in the Moroccan industry, 1956-82

Original oral history data shows that during the import-substituting industrialisation, state capitalist period delimited by the independence in 1956 and the structural adjustment program in 1982, Moroccan manufacturers were operating in an environment characterised by a high risk of contractual breach, and by long-term, face-to-face relationships with few trade partners. The judicial system was seldom used to enforce contracts, because it was dysfunctional, and would break up a valuable relationship. To avoid contractual problems, entrepreneurs were largely relying on their acquaintances: economic life was embedded in social life. Social capital was derived from the business network and social connections rather than from connections with the state, kin-based and ethno-geographic groups. Private enforcement does not work as the Maghribi traders suggest. It is a way of screening customers and suppliers based on on-demand, reciprocal exchange of imprecise information, rather than a way of inflicting collective punishment. Its efficiency depends on the structure of the business network and on the individual social capital that agents hold within this structure. The institutional environment deteriorated after the period, because an increased number of players disrupted the structure of the business network and decreased the efficiency of private enforcement.